choices

This Is Why You Settle (and How to Stop)

Kate Luther — Fri, 11 Jul 2014 09:00:08 +0000

Brand new research suggest even rats regret settling for second best.

And while I'd be the first to agree that perhaps those researchers have too much time on their hands, it does raise an interesting point.

Why do we continue to settle when we know we're going to regret it later?

After all, we're all familiar with that icky sensation we get when we resign ourselves to taking less. We know that "THIS" isn't what we really want — we wanted "THAT" — but some unseen force convinced us that settling would be the better option, and we'd be just as satisfied with Plan B.

Except that it isn't, and we aren't.

And truth be told, we knew it going in.

Fast Shoes and Cute Shoes

When I was in the 4th grade, I asked my mom to buy me a pair of track shoes. Field Day was coming up and I had seen how fast my friends ran with those amazing shoes on their feet. I was scheduled to run the 400-yard dash and I was determined that blue ribbon was going to be mine.

All I needed was a pair of those shoes.

Unfortunately, track shoes aren't the most attractive accessory and once at the shoe store, my mother found all sorts of other, "prettier" alternatives that she thought I should get instead. At first, I resisted, committed to holding out for the shoes I knew would make me fly across the finish line, but in the end, I relented and agreed to a pair of bright blue sneakers with a Holly Hobby pattern.

"These shoes are just as fast," my mother said with a smile, "and they'll look so nice with your blue dress." In that she was right — they matched the dress perfectly — but I knew, even as we stood there in line to pay, that I had sold out.

And after I took second place in the race, I never wore those shoes again.

Of course, today I know that those track shoes didn't guarantee me a win. And just between us, I will also shamefully admit to having a very similar conversation with my daughter on more than one occasion and taking the viewpoint of my mother without a second thought.

But I still wish I had bought those shoes.

Plan B might not be all that bad. Things might actually turn out okay. And yes, there are those instances where letting go can open up possibilities you hadn't thought of before.

But sometimes, we want what we want. Sometimes, despite all the logic that tells us to wait, resist or settle for something less, our desire simply can't be quelled. And we know — in that instinctive, pit of our stomach, no-doubt-about-it way of knowing — that we're going to regret anything less than satiating that desire.

Why Do We Settle?

Those things we desire, be it the perfect partner, the dream house in the country, the job with the corner office, or those lightning-fast track shoes, all have something very specific in common: They represent a better version of life, and when we fail to get them, we feel regret because we let ourselves down — just as we feel regret when we disappoint someone else.

Unfortunately, we're also all wickedly addicted to what's familiar and that can make it hard to hold out for what we want. We don't like change, even if that change represents something better because it also represents the unknown. So, if it's easier to settle — if settling keeps us in our comfort zone — then settle we will.

This hesitation is further reinforced by our deep-seated need to fit in. We're wired to be social and when our path looks like it might take us in a direction opposite the rest of the crowd, we'll adjust in order to stay with the group.

And armed with this mentality — our need to fit in and our fear of the unknown — we ignore what we really want and talk ourselves into settling for something less, even when we know we're going to regret it later.

Settling on Settling

The thing is, the more we settle, the more accustomed we become to doing it. Like everything else in life, settling becomes a habit and before you know it, it's not just your go-to move, it's the best you think you can get.

Now, ironically the fix for this is as simple as refusing to settle, but the more we experience not getting what we want, the more comfortable we are to accept less. And the more we accept less, the more we experience not getting what we want. As Maureen Dowd writes, "The minute you settle for less than you deserve, you get even less than you settled for."

Ok. So let's stop settling.

How to Stop Settling

Stopping is easier than you might think.

1. Make Sure Your Desire Isn't Panic or Impulsivity in Disguise

Before you declare your allegiance to something or someone, make sure it's really something (or someone) you really can't live without.

The best test? Wait. Impose a mandatory waiting period before making any big purchases or commitments (or even smaller ones if you find you're having second thoughts) and see if that desire is still as strong once your waiting period is over.

That's all well and good you say, but what if there's no time to wait? What if opportunity knocks and you have to make a quick decision?

2. Get Clear on What You Want and Why You Want It

Understanding what drives you is a key component to figuring out how to get from your current state of here to you ideal version of there. It's also a useful tool when you need to make those split-second decisions and you're not sure which way to go.

Do you take that promotion? Instead of making money the only deciding factor, make sure the new job "fits" with your long-term plan for happiness. Should you buy this house? It depends on whether "this house" and the mortgage and maintenance that comes with it, is part of what you really want.

Remember, that settling isn't just taking less than what you really wanted in the here and now. it's also making commitments that keep you from moving forward in the future. That's why people who settle often feel trapped — they've created a life that doesn't bring them joy, but also doesn't offer easy options for escape.

3. Learn to Listen to Your Inner Voice

We all have it. That little voice in your head that says don't do it, stay away, this isn't what you wanted. But over the years, we've learned to ignore it.

That voice can be a nag. That voice can be overly critical. That voice just doesn't let us have any fun. But that voice is actually more than just a conscience. It's also your best defense against making decisions you'll later regret. So, when you get that icky feeling or you hear those nagging whispers, pay attention.

It knows what it's talking about.

4. March to Your Own Drum

You don't need to live the way your parents or your friends or your spouse wants you to live — they have their own lives to mess up. You have to walk your own path, follow your own dream, march to your own drummer. Sometimes, that might take you in the same direction that others are going and sometimes, it won't.

You have to be okay with it either way.

5. Believe That You Are Worth the Effort

If you're settling because you think it's all you deserve, you're wrong. But you'll never experience "more" until you decide you're worth it and that's something only you can change.

Maybe you need to talk nicer to yourself. Maybe you need a more positive circle of friends. Or maybe you just need to let go of all the internal drama and make the conscious decision to be in a happier state of mind. I know that can sometimes be easier said than done, but that doesn't mean it's not worth doing.

6. Make Conscious Choices

There is a difference between "settling" and "choosing" to go a different way and that's really how to ensure you never have to wrestle with that icky feeling again.

Choosing a less expensive car for example, because it gets better mileage or because the payments are more in line with your long-term financial goals is a purchase you can feel good about, even if it isn't the flashy sports car you had your eye on.

That's not settling. That's knowing what you want (like we mentioned earlier) and being in sync with those desires. You still may end up delaying or even foregoing something you wanted, but when you do it consciously, it's much easier to live with the decision.

When was the last time you settled and regretted it later? Don't miss this opportunity to share in comments!

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This article is from Kate Luther of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Steps to Improving Your Critical Thinking

Tara Struyk — Wed, 29 Aug 2012 09:48:43 +0000

Every day, I’m amazed at the amount of information I consume; I listen to the news on my morning run, scan the papers while I’m eating breakfast, check my social media accounts throughout the day, and watch some TV before I go to bed, all while getting constant updates via email and Twitter. That’s pretty overwhelming on its own, but things get really interesting when some of that information is biased, inaccurate, or just plain made up. It makes it hard to know what to believe. But even with all the competing sources and opinions out there, getting the truth — or at least close to it — matters. What you believe affects what you buy, what you do, who you vote for, and even how you feel. In other words, it virtually dictates how you live your life.

So how can you sort the wheat from the chaff? Well, one clear way is by learning to think more critically. Critical thinking is as simple as it sounds — it’s just a way of thinking that helps you get a little closer to the best answer. So the next time you have a problem to solve, a decision to make or a claim to evaluate, you can decide whether it’s likely to be true — and if you should do anything about it. Here’s how. (See also: How to Improve Your Memory (and Even Get a Little Smarter))

1. Don’t Take Anything at Face Value

The first step to thinking critically is to learn to evaluate what you hear, what you read, and what you decide to do. So, rather than doing something because it’s what you’ve always done or accepting what you’ve heard as the truth, spend some time just thinking. What’s the problem? What are the possible solutions? What are the pros and cons of each? Of course, you still have to decide what to believe and what to do, but if you really evaluate things, you’re likely to make a better, more reasoned choice.

2. Consider Motive

We recently got a call from our cellular service provider about changing our very old, very cheap cell phone plan. They claimed they could give us a new plan that would provide better value. But why, my partner asked, would the company be interested in pursuing us so that we could pay less? Aren’t companies generally interested in making more money? Good question, right? And the reason we were asking it is because we questioned the cellular phone company’s motives. What they said just didn’t make sense.

Where information is coming from is a key part of thinking critically about it. Everyone has a motive and a bias. Sometimes, like the cellular phone company, it’s pretty obvious; other times, it’s a lot harder to detect. Just know that where any information comes from should affect how you evaluate it — and whether you decide to act on it.

3. Do Your Research

All the information that gets thrown at us on a daily basis can be overwhelming, but if you decide to take matters into your own hands, it can also be a very powerful tool. If you have a problem to solve, a decision to make, or a perspective to evaluate, get onto Google and start reading about it. The more information you have, the better prepared you’ll be to think things through and come up with a reasonable answer to your query.

4. Ask Questions

I sometimes find myself shying away from questions. They can make me feel like a bit of a dummy, especially when whoever’s fielding them isn’t receptive. But mostly, I can’t help myself. I just need to know! And once you go down that rabbit hole, you not only learn more, but often discover whole new ways of thinking about things. I think those other perspectives can also help you get closer to thinking through a problem or uncovering what’s what, which brings me to my next point ...

5. Don’t Assume You’re Right

I know it’s hard. I struggle with the hard-headed desire to be right as much as the next person. Because being right feels awesome. It’s an ego trip almost everyone aims to take at some time or another. But assuming you’re right will often put you on the wrong track when it comes to thinking critically. Because if you don’t take in other perspectives and points of view, and think them over, and compare them to your own, you really aren’t doing much thinking at all — and certainly not the critical kind.

6. Break It Down

Being able to see the big picture is often touted as a great quality, but I’d wager that being able to see that picture for all its components is even better. After all, most problems are too big to solve all at once, but they can be broken down into smaller parts. The smaller the parts, the easier it’ll be to evaluate them individually and arrive at a solution. This is essentially what scientists do; before they can figure out how a bigger system — such as our bodies or an ecosystem — works, they have to understand all the parts of that system, how they work, and how they relate to each other.

7. Keep It Simple

In the scientific community, a line of reasoning called Occam’s razor is often used to decide which hypothesis is most likely to be true. This means finding the simplest explanation that fits all facts. This is what you would call the most obvious explanation, and the one that should be preferred, at least until it’s proven wrong. Often, Occam’s razor is just plain common sense. Sure, it’s possible that the high-priced skin cream on TV will make you look 20 years younger — even though you’ve never heard of it, and neither has anyone else. What’s more likely is that the model shown in the ad really is 20 years old.

Critical thinking isn’t easy. It involves letting go of what we want to believe and embracing a whole bunch of new information. It’s uncomfortable, but it’s also interesting. And when you do your research and finally lay out what you believe to be the facts, you’ll probably be surprised by what you uncover. It might not be what you were expecting, but chances are it’ll be closer to the truth.

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This article is from Tara Struyk of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Reasons Why a "Good Enough" Decision May Be Best

Tom Harnish — Sun, 20 Feb 2011 17:57:36 +0000

Link:

http://www.openforum.com/idea-hub/topics/lifestyle/article/4-reasons-to-settle-f...

Successful businesses are based on results, not promises; action, not plans; decisions, not procrastination.

Yet, in spite of the abundance of information — or more to the point, because or it — business decisions are increasingly hard to make. We sift through tons of irrelevant information on Google, Bing, and Yahoo in hopes of making an optimal choice.

The solution, as odd as it may sound, may be to stop trying to find the best solution and be happy with good enough. Here's why:

1. It's Hard to Know What You Want

"Look, we need to make a decision here and take some action. We need results, and we need them now." Sound familiar? Anyone who's ever run a business has said those words, or similar, many times. But making a decision requires that you know what alternatives are available, and more importantly, which one is the best.

Generally we make decisions based on prior experience. The problem is we're not very good at remembering experiences. Princeton Psychologist Daniel Kahneman has done some fascinating research that shows we only remember the best of what we experience, and how the experience felt at the end. He calls this the "peak-end" rule, which suggests people remember the average of an experience, not the sum.

For example, one group of people in an experiment were subjected to loud noise, while a second group was exposed to the same noise plus more, but less painful, noises at the end of the session. The second group, surprisingly, said the the experience was less unpleasant than the first group, even though they actually had to listen to more noise.

How does this play out in a business? Years ago you made a decision. The results were a disaster, but all the angst and chaos tapered off as you got things back under control. You remember the decision as a reasonably good one because on average things weren't so bad, especially at the end.

2. We Can’t Trust Ourselves

In some deep way, many of us know we really shouldn't trust our experiences. So we talk about, and read about, other people’s experiences and opinions in hopes of making better decisions. You're doing that right now.

The problem is we're wired to depend on what's most available, or what we're familiar with. You see lots of ads that offer discounts, so you assume discounting must be a good idea. In fact, it often isn't.

College students selecting classes are influenced more by a single review from someone they know than an extensive evaluation survey collected from several hundred students. Advertisers learned long ago that branding works because people will chose what's familiar, a brand name they recognize. Mass media features dramatic causes of death such as tornados, accidents, floods, fires, and homicides. So we overestimate how often those occur while, at the same time, we underestimate diabetes, asthma, stroke and tuberculosis — more common causes of death.

Worse, because we often have to rely on secondhand sources, we find ourselves relying on the same secondhand sources, such as CNN or Fox News or Huffington Post. What that means is that we're less likely to get unbiased advice from someone else's experience. We also tend to associate with people of like mind, so we limit the advice we receive to people who think like we do. Soon we’re believing in something that has no basis in fact — something that may even be based on fraud, such as the anti-vaccination baloney that’s actually killing kids.

3. We Don't Know How to Make Good Decisions

If discounts are a bad idea, why do department stores seem to have everything on sale all the time? Because we're bad at decision making. They give us the manufacturer’s suggested retail price as an anchor, and then lead us to believe we're getting a great deal by offering what seems to be a bargain. One mail-order catalog offered a $279 bread maker with mediocre results. When they offered a super-deluxe version for $429, sales of the cheaper model almost doubled.

Even the way information is framed affects our decision-making. Two stores sell a particular brand of paint. One store has a big sign that says, "Discount for Cash!" and offers the paint at $11.50 a gallon, or $10.50 if you pay cash. A nearby store offers the same paint for $10.50 a gallon, but imposes a $1 surcharge per gallon if you charge it. Research shows that we'll go for the discount every time, even though the cost is exactly the same. We'll also pick a small-but-sure gain (do you want $100 now?) over a large but uncertain one (or $200 based on the flip of a coin?). And we prefer yogurt that’s 95% fat-free over yogurt with 5% fat content.

We're also psychologically challenged when it comes to making decisions about gains and losses. Losses are "more bad" than gains are good. That's why money-back guarantees work — people think something they possess is worth more then its cash value, so if they return it they feel as if they've lost something.

4. We Strive for the Optimum Choice at Our Peril

Seeking the best is impossible when you have many alternatives. The only way to know if you’re picking the best alternative is to know what they all are. In today’s world that can drive you nuts. An "if only I had..." mentality can lead to regret, and that steals from the satisfaction of even a good, if not optimum, decision.

In fact, when economists theorize about how we make decisions they assume we try to maximize our preferences, our satisfaction. What they’ve learned is that satisfaction and preferences are subjective, not objective. And that’s where the idea that good enough — not necessarily the best — decisions, actions, and results may make the most sense.

Daily decisions overwhelm us to the point that we want to avoid making them. But if we understand that any decision is usually better than no decision, that there never will be a perfect choice, and that we are going to make mistakes, we’re on the path to satisfaction and sanity.

We can limit our choices, decide which ones are important and invest our time in those. The entrepreneurial predisposition for a "ready, fire, aim" approach is based on that premise. Does the color of your logo really matter when you don’t have any customers?

Choose an alternative; don’t just pick one. Once you’ve narrowed the list of choices, you’ll have the time and attention to be thoughtful, even creative, about what to do.

Every advertiser tries to convince you to accept only the best, but if you can embrace the idea that good enough can be satisfactory, you can stop trying to make the perfect choice and get on about your business.

Think carefully about what you want, where you’re going, and what’s important. Once you do, make a decision and take action and you’ll find the result much more satisfying.

This article is from Tom Harnish of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Would You Accept $200,000 If You Didn't Know Where It Came From?

Paul Michael — Tue, 07 Jul 2009 20:52:26 +0000

You know, I hear a lot of people say that frugal people would do anything for dime. Personally, I think that applies more to greedy people, but it got me thinking of a question that combines morals with money. Would you accept $200,000, no strings attached, if you did not know where it came from.

As I was thinking of this question, a classic episode of The Twilight Zone popped into my head. Based on a story by Richard Matheson, it was one of those episodes that creeped me out for days, and I was only a young lad at the time. Here's an outline of the episode "Button, Button" (you'll see why this is apt in a moment):

Norma Lewis is the wife of a down-and-out man named Arthur. One day, they receive a mysterious box with a button on it. Then, a smartly-dressed stranger comes to their door and explains that if they press the button on the box, two things will happen: they will receive $200,000, and someone "whom you don't know" will die.

The episode then concentrates on the enormous decision that Norma Lewis has to make. And, after some back and forth, the climax of the episode (and the moral, we hope) is revealed:

Norma decides to push the button. She does it and her husband looks at her with disgust. They go to bed after seeing nothing happens. The next day the stranger returns, takes back the box, and gives them a briefcase with the $200,000. The Lewises are in shock and ask what will happen next. The stranger ominously replies that the button will be "reprogrammed" and offered to someone else with the same terms and conditions, adding as he focuses on Norma, "I can assure you it will be offered to someone whom you don't know."

It's a classic Twilight Zone scenario, in which greed is rewarded with the ultimate penalty. But what if there wasn't a penalty; at least, no penalty that you were aware of?

If the Lewises has been offered the money and told "accept this money, no questions asked, and you will feel no repercussions" I doubt they would have taken as long to accept the money.

Imagine, especially in these tough financial times, that a stranger offered you the money with absolutely no chance that it would come back to bite you. There would be no mob guys knocking on the door, no prison terms, no danger. The only condition is that you cannot know where the money came from. Would you take it? Would you even hesitate?

The problem here is that although the money could come from a generous benefactor, it could also be the result of something terrible -- perhaps the slave labor of children, war profiteering, drugs, prostitution or something worse.

And yet, it's not so far-fetched to think that we all do this, every day, on a much smaller scale. When we choose the $59 Nike shoes, do we think about the way in which they were made? When we demand lower prices for clothing and toys, do we care about the conditions that exist in order to make those deals possible? When we buy cheap eggs, do we care about the factory-farming hell that created them? Food, electronics, cars, beverages, everything we touch these days has a moral price attached to it.

So, think about that question again; would you take the $200,000? At what point would a no become a yes? At what point would your conscience kick-in? And when is a bargain something that has a much higher cost associated with it? Over to you...

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Lucky trade-offs

Philip Brewer — Wed, 31 Dec 2008 13:08:11 +0000

I view frugal living as essentially hedonistic: I don't deny myself things. Rather, I spend less on the things I don't care about in order to be able to spend more on the things that matter to me. Anybody who does this, though, sooner or later (as soon as friends, relatives, coworkers, or neighbors notice some of that spending on things that matter more) is going to hear, "You're so lucky to be able to afford that!"

In my case, it's been leaving the regular job behind to write full time that's draw the comments about how lucky I am. Our occasional vacations to the islands have drawn comments on our great luck as well.

The first few times people suggested that my being able to write full time was "lucky," I was speechless. I wanted to explain that it's all about trade-offs. I wanted to talk about how, contrary to how people seem to view it, frugal living gives you more choices, because you're not tied to a high-earning job.

I didn't, though, because I learned long ago that most people don't want to hear it. Most people don't understand--and the ones who do often react as if I'm criticizing their lifestyle. (And maybe I am, although that's not my intention.)

Somewhere along the way I came up with a response that I'm comfortable with. I say, "It's not all luck." That way, if I run in to the rare person who does want to hear, all they have to do is ask. And everyone else is able to nod and pretend that I've partially agreed with them.

After all, they are partially right. I have been very lucky.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Sound advice for winning on a game show

Paul Michael — Mon, 25 Feb 2008 18:23:03 +0000

I've been a closet fan of game shows for years; most likely because I love the idea of getting something for nothing (hey, this is a frugal writer after all). I recently stumbled across something called "The Monty Hall Paradox" and it's opened my eyes to the laws of probability in the seemingly innocent world of game shows. And armed with this knowledge, you've got a much better chance of winning something.

Monty Hall was the host of a show called "Let's Make A Deal," which was very popular in the 60's and 70's. One of the cunning and cruel games he liked to play was the "3 doors dilemma." It worked like this: You would be presented with 3 doors. Behind one door is a fabulous prize, like a car or vacation. Behind each of the other two doors is a dud, like a goat or toilet paper.

Monty would ask you to choose a door. Then, before you opened it he would open one of the two remaining doors to reveal one of the dud prizes. Now he asks you a simple question..."Would you like to stick with your original choice, or switch to the other door?"

At this point you're rubbing your head, like I was, and you come up with the only logical solution; it doesn't matter. There are now two doors, one has the star prize, one doesn't, so it's 50/50, right?

Not so. Not so at all, as I found out when I delved deeper into the paradox and discovered that dozens of very smart mathematicians have been trying to explain this one for eons.

I have posted several videos and links below so that these boffins can explain it for you, much better than I could here. But, in a nutshell, here's the solution; you should ALWAYS switch doors.

The reason is simple...at the start of the show you have a 33% chance of picking the star prize, and a 66% chance of picking the dud prize. So, the odds are you will pick a door with a dud prize. That means that when Monty Hall reveals a dud prize behind one of the other doors, the remaining door is much more likely to be the star prize. See? Well, I had to watch the videos to be convinced, so give at least the first one your attention.

But if you ever do make it onto a game show, maybe like The Price Is Right, or someone tries the same trick using 3 cups and a ball, you now know just what to do to put the odds firmly back in your favor.

Video 1 - The 5-minute explanation

Video 2 - The TV show explanation

Video 3 - The math boffin 20-minute exploration

Doing without is often better than making do

Philip Brewer — Thu, 14 Feb 2008 09:10:11 +0000

For anything you might buy there are almost limitless choices. For purposes of argument, I'd like to group them into three categories: You can buy the best; you can buy some crappy imitation of the best; or you can buy nothing at all. People argue a lot about the parameters of the first two choices. I don't think the third gets the attention it deserves.

Buying the best is the right choice in many cases. For tools, it's a no-brainer. For something that you're going to be using for decades, the extra cost approaches zero when you figure it on a per-use basis. For something that's mission-critical (or life-critical), paying top-dollar for quality just makes sense.

Of course, in many cases, people can reasonably disagree about what's "the best" in any particular category. That's a good thing--if everyone agreed, whatever they agreed on would cost even more. There are plenty of more expensive things that aren't any better for your purposes than a cheaper one would be. There's not much point in thinking about what might be "the best" in the abstract--it's only a useful concept when you're thinking about something being best for a particular purpose.

There are circumstances where something just good enough to get the job done is the right choice. Something that's going to be thrown away after one use anyway, whether for safety reasons (like medical equipment) or just because you don't expect to need to do it again, just needs to be good enough to get the job done.

Sometimes, if you simply have to have one, and all you can afford is a cheap one, that's what you're stuck with.

Often, though, people only imagine that they need something. And, once they imagine they need it, it's easy to decided that, if they're going to buy one, they might as well buy a really good one. "But I need one" is probably the most common path to buying crap you can't afford (followed closely by "But I deserve one").

If you're going to live a frugal life, you need to break that chain before you start buying the best of everything, and the place to break it is not when you get to "I might as well buy a really good one." The place to focus is on the "If I'm going to buy one" part.

One trick that I find useful is to focus on the quality differential. There's hardly anything you can buy that doesn't have a better alternative available, if you pay enough. I've chosen not to buy an awful lot of stuff over the years, and pretty often part of the reasoning was along the lines of, "If I can't afford X, I'll just do without," filling in X with "the best" of whatever category I'm dealing with.

That's just a mental trick, though. The real key to making the right choice is to remember that acquiring stuff is not a series of yes/no decisions--it's an allocation of limited resources. You can temporarily hide the fact that your resources are limited by buying things on credit, but that doesn't change the underlying reality; it just means that you end up with even less in the long run.

Before you start the analysis of what's the best choice for your particular application, and before trying to decide whether it's worth paying extra to get it, think hard about whether you really need one.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Common Currency: A Primer

Jabulani Leffall — Wed, 02 Jan 2008 17:50:54 +0000

Common Currency isn't your father's personal finance blog.

This is mostly because when your father came of age, Al Gore hadn't invented the Internet yet but in practice this means that you won’t get me to lying or falsely waxing about the latest, greatest mutual fund, interests rates and how to get deals on taffy and boots – whatever your preference.

No sir, no ma’m. These postings will pertain to the economy of life, which unless you’d like to return to the cave painting days with harry but urbane insurance pitchmen, will revolve mostly around that dolla-dolla bill. In large part though it’s about choice, personal alternatives that shape our financial world. So break out your pie charts, this will be 25 percent personal anecdotes, 50 percent about money, 25 percent fiscal philosophy, 100 percent edutainment.

There you have it, now let’s get personal – about finance.

I failed economics class in college and when I say failed, I mean miserably, like I laughed hard when I came out of the final exam because there was no way in hell that I passed the test or the class. I took the course again two years later and passed with flying colors but that ain't the point. I learned more macroeconomic theory and practice in a failed effort than I did the second time around when I just went through the motions, most notably studying. Go figure.

What did I learn? Two resonating words: Opportunity cost, a stalwart economic principal, a paradigm for decision andpolicy making and yes a phrase to which I've alluded redundantly and incessantly during dinner conversations, in the process of saving and blowing money, in falling in and out of dating circles, during job interviews and for some reason, on the toilet.

Here's how it works. The determination of the equilibrium in a given market boils down to supplyand demand and....oh who am I kidding. Opportunity cost means that if you choose one alternative, you forego another. In our economy, society and life, we all supply and demand something and thrive or founder on the value of the exchanges.When you exchange one alternative for another, whether it be a choice about time or money, you’re losing something with each purchase.

Eat out, save time. Eat in, save money, lose time cooking and cleaning up. Take public transport, save money on gas and weapons for road rage fights. You’re also at the mercy of forces beyond your control such as a late bus or train. Spend your rent money in Vegas, get evicted. Pay your rent and snarl at your friends when they recall how fun it is to be young and irresponsible.Suffice it to say, many blogs and columns about PF will tell you to make a choice and stick to it. This joint right here, will present the choices and allow you infuse your own philosophy because despite the fact that the savings rate is the worse it's ever been and consumer debt is at an all time high, money, like time, is made to be spent wisely and that starts with knowing the cost of each opportunity.

Now go tell your pops about this.

This article is from Jabulani Leffall of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Live like royalty on $20,000 a year

Philip Brewer — Sat, 08 Dec 2007 15:00:38 +0000

I'm stealing the title for this post from the cover of a magazine that I saw back in the early 1980s. It caught my eye especially, because at the time I had just gotten a raise and was, in fact, making $20,000 a year. I was intrigued enough to pick up the magazine and glance through the article, only to be terribly disappointed. The author had a very different notion of how royalty live than I did.

I didn't buy the magazine, and I've always kind of regretted it, because, once I got past the cognitive dissonance that the title created for me, it actually wasn't a bad article, about the same topics that we cover here at Wise Bread. It was all about finding bargains, making do, and ways to get what you want by spending time instead of cash.

The only specific piece of advice that I can remember doesn't apply exactly any more. Airlines were still in the throes of deregulation, and there was a constant stream new cheap ways to fly, usually various versions of flying standby. Their example involved something like waiting until three days before your vacation and then scrutinizing lists of destinations for cheap deals. My reaction was, "This is how royalty travels? They decide where to vacation based on where the cheap flights are going? I don't think so."

Now that I've had 25 years to think about it, I have a very different perspective of how royalty live. My wife, for example, spent a few nights in the home of a member of the Balinese royal family. They had been deposed some time earlier, and much of their wealth had been seized, but they had a house and rented out rooms--the princes and princesses would all squeeze together to vacate a room for a paying guest.

They key here is when you think "royalty" don't think "Queen of England." Think "pretender to the Dalmatian throne" or the descendent of some Raj or Khan.

What would you do, if you really were royalty? You'd never rule (nor, if you have any sense, ever want to). Give that, you'd be just like you are now, except that you'd have all the extra baggage that comes along with being royal--history, other people's expectations, family traditions and aspirations.

Seize the advantages of being a commoner!

Your family still has aspirations, but they're both modest and amendable. If they don't match your own, work to guide them to a better match.
Think about your family traditions. Hold onto the ones that you value; abandon the others.
Except for your family, ignore the expectations of others. It won't even occur to them to despair of the future of your house or your family line.

In fact, when you think about it, the fantasy of being royal is being able to do whatever you want. The reality is that being a commoner makes it much easier.

The key here, as in most things, is to think clearly about what you want. Your big advantage over royalty is that, once you know what you want, you have many fewer constraints than a royal does in arranging your life to achieve your goals (rather than the goals of your subjects).

Figure out what you want from life. It may well be the case that you can't get everything you want--but you can get almost anything that you want, if you make that thing a priority, and arrange your life to get it.

You can get much closer to the fantasy of living like royalty than most royals ever do.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: